Shopify's Growth Comes To A Halt

Sebastien Callebaut -

Inflation And Lower Online Spending Hurt

Shopify's platform is now being avoided by companies hurt by rising prices and decreasing consumer spending, which is impeding its efforts to correct previous errors in overestimating e-commerce demand.

  • According to YipitData, Shopify only added 71,000 net merchants during the first half of 2022. At the pandemic's height in 2020, it added 680,000 merchants, and in 2018, it added 314,000
  • Yet, the slowdown seemed to be concentrated in its non-Plus merchants and thus mainly concerns smaller retailers who may be relatively more exposed to rising interest rates

"You have to get people at the top of the funnel ... If you're not getting the members in today it will probably affect your Plus conversions in the next quarter or quarters ahead," GlobalData analyst Neil Saunders for Reuters

Lay Offs And Mismanagement

Back in July, Shopify announced that it will be cutting about 1,000 employees, or about 10% of its global staff. CEO Tobi Lutke stated in a note to colleagues that he had overestimated the duration of the pandemic-driven e-commerce boom and that Shopify will be cutting a number of positions in light of a general decline in online spending.

  • Shopify is getting rid of “over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products,” according to a statement by the CEO

Diversifying Into SaaS

Shopify has recently invested $100 million in Klaviyo, an e-commerce marketing automation platform. The announcement was made at the same time as the news that Klaviyo and Shopify would extend their current alliance by recommending Klaviyo as the email service for Shopify Plus, the company's premium merchant plan, and giving Klaviyo early access to Shopify products still under development.

  • Klaviyo, a Boston-based company founded in 2012, enables users to automatically set up triggers for notifications concerning abandoned carts and product recommendations
  • The marketing automation technology market is highly competitive (see Sendlane, Sendinblue and Cordial). However, Klaviyo has managed to attract over 100,000 paying clients, including Unilever and Dermalogica and is valued at around $ 9.5 billion

Klaviyo is the most recent investment and purchase made by Shopify with the goal of expanding the e-commerce platform's market. The largest acquisition in Shopify history, Deliverr was purchased by the company in May for $2.1 billion in order to create a "end-to-end" logistics platform for retailers.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Roberto Cortese on Unsplash.